Want to stop ISIL? Kill the money trail!

By Robert Presser on September 29, 2014

A remarkable event occurred during the week of September 22nd 2014 – the US and Arab-nation coalition against ISIL attacked the Islamic fundamentalist group’s oil assets in northern Iraq and southern Syria.  Long considered off-limits under the hopes that legitimate governments would reassert control over these locations, this is the first overt attempt at cutting off the flow of profits from low-priced ($30 per barrel) oil sales used to finance the nascent caliphate’s terrorist activities.  This overt undertaking is a tacit admission that neither a legitimate Iraqi nor a non-Assad Syrian coalition are likely to re-take these assets in the short or medium-term, so preserving their integrity is to be sacrificed for the greater goal of crippling ISIL’s finances.  While this is just a first step, it represents a critical tactical change in the War on Terror, now in its second decade.

A cursory glance at the history of fundamentalist Islamic finance is required at this point to understand where ISIL gets its money.  First, it is an open secret that the United States cooperated with the Saudi royal family to fund, equip and train Taliban and embryonic al-Qaeda forces (including a young Osama bin-Laden) in the early 1980s in order to fight the Soviet Union in Afghanistan.  The US and Saudis were greatly assisted by Pakistan at that time, who exploited the porous border between Pakistan and Afghanistan to smuggle arms and funds to these opposition groups.  Three years ago Pervez Musharraf, the former president of Pakistan, recounted this complete tale to a hushed audience at the Economic Conference of Montreal – I never saw a room where everyone put down their phones to listen so intently, with such awe, to this remarkable story.  Once the Taliban took over in Afghanistan and al-Qaeda undertook its terrorist activities worldwide, the US funding stopped but the Saudi money continued to flow, even after 9/11 and the wars in Afghanistan and Iraq.  Keeping the Sunni-based al-Qaeda organization alive in Afghanistan and Iraq was seen by the Saudis as a check against growing Iranian influence in the region and, of course, the rival Shiite movement.

The House of Saud has moved to curtail these financial flows to ISIL, al-Qaeda and the Muslim Brotherhood, among others, but there are many ways to get money out of Saudi that are beyond the scope of conventional banking controls.  For example, unregulated Islamic Hawala money transfer banks can send funds from one country to another without a paper trail, making the source and beneficiary impossible to trace.  Saudi Arabia also has a large migrant workforce totaling more than 10 million people who can transfer funds easily as transient or temporary workers.  While this funding is no longer officially sanctioned by the House of Saud, its clients have since diversified their sources and developed substantial assets through their terrorist activities.

ISIL (or ISIS) was the natural successor to al-Qaeda in Iraq and had an intricate financial system created by its mastermind, Abu Musab al-Zarqawi, now deceased.  In addition to seizing oil fields and related production facilities, they practice mafia-style extortion of businesses and individuals in the territories they control, take over official taxation, hold hostages for ransom and steal salaries from government workers.  Government assets proved particularly lucrative; when ISIL took over Mosul, they looted $429 million USD from the Iraqi treasury.

ISIL has seized military equipment abandoned by the US-trained Iraqi army.  That equipment still needs ammunition, the correct fuel and spare parts to sustain its operations.  The funds for these supplies will have to pass through banks in the network of Arab nations to arms dealers who can complete the resupply.  These funds, if properly traced, can lead to the dismemberment of the intermediaries who sustain ISIL and the sanction of the financial institutions that assist them.  No money eventually equals no war and there is a good precedent for that formula; the Iran-Iraq war of the 1980s eventually ended when both regimes were completely financially exhausted regardless of their zealous desire to continue.

ISIL.jpgThe cooperation of Saudi Arabia represents great risk for the House of Saud.  Their fundamentalist Wahhabi roots go back almost 400 years to the early 17th century, when they first controlled large portions of what is today Saudi Arabia with a tribe called the Ikhwan.  The Wahhabi religious movement was their spiritual and functional partner on the ground and the movement is still strong today.  The ISIL philosophy is closer to that of the Wahhabi than the internationalist royal family and fighting ISIL means that the Sunni Sauds are fighting against Sunni brethren, in indirect cooperation with their Shiite Iranian rivals.  To my knowledge, this is the first time in post-western imperialist Arab history that Sunni is fighting Sunni in a declared open war.  There has been previous religious unrest in Saudi Arabia, notably the 1979 occupation of the al-Haram mosque at Mecca by Wahhabi puritanical warriors related to their old allies, the Ikhwan.  The regime fought a violent battle to take back the mosque and that conflict is not forgotten.  It is entirely possible that Saudi Arabia is inviting internal unrest by attacking an offshoot of their cultural and spiritual heritage.  Those Saudi Wahhabis intent on continuing to finance ISIL are going to find a way to do it outside of whatever controls the government wants to impose and the financial stress will likely expose divisions within the royal family.  Thousands of royals cannot possibly all be on the same page on this issue; there have been splits in the House of Saud before, coups and plots like the one that put King Faisal on the throne in 1964, and it can certainly happen again.

Let’s make some bold assumptions here; the money will get cut off, the air war will be effective and Iraqi, Saudi, the Kurdish Peshmurga and even some Iranian troops will occupy all the territory currently held by the ISIL caliphate.  Where will all the ISIL fighters go?  If they try to return to their native countries, this simply exports the radical, violent Islamic agenda of ISIL around the world.  If they stay in the territory, they have to be integrated into society and re-educated otherwise they will take up arms once again in place of alternate employment.  Who will fund the re-creation of borders in the area and hold off the statehood ambitions of the Kurds, if that is at all possible?  The irony is that stopping the money flow to ISIL, coupled with military victory may end the current hot war but it is not a basis on which to build a warm peace.  Billions have been spent in the name of death; which groups will spend the billions to give the region a better life after the killers go back to their lairs?  This is not a question to be put to a new US president, UK PM or Middle Eastern rulers alone, it is a quandary that will require extraordinary international cooperation and decades to solve.


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